Studies Look at Labor Situation, Tax Havens in Latin America

By Gaudin, Andres | NotiSur - South American Political and Economic Affairs, August 24, 2012 | Go to article overview

Studies Look at Labor Situation, Tax Havens in Latin America


Gaudin, Andres, NotiSur - South American Political and Economic Affairs


Amid a global crisis that has converted the world's largest economies into labor exporters, Latin America continues showing enviable employment indices, and, in 2012, its performance is expected to continue improving. That is the assessment of the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labor Organization (ILO) in the joint report in the May 2012 bulletin The Employment Situation in Latin America and the Caribbean. The two UN agencies say that this year the region will reduce its unemployment rate by 0.2%, from the 6.7% of the economically active population (EAP) posted in December 2011 to an average of 6.5%. The rate could be even lower for the 12 South American countries.

The report also says that underemployment is lower and that the proportion of formal-sector jobs with social benefits is growing. It attributes the good performance to inclusive programs, applied in the case of South America by progressive governments that support, first, an increase in public spending for infrastructure works and, second, social and wage-protection policies aimed at increasing domestic demand.

Nevertheless, not all the data in the ECLAC/ ILO report are positive. The study notes that "important labor-market gaps and serious labor-market insertion issues remain," especially "for women and young people for whom unemployment rates are still unfavorable," and it points out that in most countries wages grew less than productivity, which means that income distribution continues to be unequal.

The agencies said that, despite the crisis in Europe--now in its third quarter of recession with an average of 10.4% unemployment, with extremes like Spain, where unemployment exceeds 25% (52.7% for those under 25 years of age)--the greater demand for work increased in real terms both median and minimum wages. But the UN agencies emphasized that the job expansion, which reduced the number of unemployed to some 16 million, has taken place within a situation of inequality.

In the forward to the study, ECLAC executive director Alicia BArcena and ILO regional director Elizabeth Tinoco said that the region needs to grow more and better. "Productivity must grow at a steady pace, to serve as the basis for sustained improvements in the well-being of the populace and to narrow the gap between the economies of Latin America and the Caribbean and the more advanced economies," they said.

Dual challenge for sustained growth

The unequal distribution brings a challenge, said Barcena and Tinoco. "Therein lies a dual challenge that must be addressed: continue to increase productivity while enhancing the mechanisms for distributing gains in a way that will encourage investment and boost worker and household income."

While the first part of the study deals with aspects that are essentially labor related, the second part analyzes whether the fruits of economic growth and increased productivity have been distributed equitably between workers and business. "Between 2002 and 2008 (the most recent expansionary economic cycle), wages as a percentage of GDP fell in 13 of the 21 countries of the region for which data are available and rose in just 8. This points to redistribution that is unfavorable to workers, which is worrying in a region which already has the most unequal distribution of income in the world," said Barcena and Tinoco.

And that is true from Mexico to Argentina. This reason for this is that globally salaries have risen less than productivity. "Beyond the ethical dimension of this issue, it jeopardizes the social and economic sustainability of growth," the women say.

The report then gives the example of what happened in the US and says that "one of the root causes of the recent financial crisis was that households in the United States responded to declining wage income by borrowing more to pay for consumption and housing. This turned out to be unsustainable in the long run.

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Studies Look at Labor Situation, Tax Havens in Latin America
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